Derivative Financial Instruments (Notes)

6 Months Ended

Dec. 31, 2013

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Derivative Financial Instruments

Derivative Instruments

Derivative Instruments Held

Coffee-Related Derivative Instruments

The Company is exposed to commodity price risk associated with its PTF green coffee purchase contracts, which are described further in Note 1. The Company utilizes futures contracts and options to manage exposure to the variability in expected future cash flows from forecasted purchases of green coffee attributable to commodity price risk, in some instances, as much as 24 months prior to the actual delivery date. Certain of these coffee-related derivative instruments utilized for risk management purposes have been designated as cash flow hedges, while other coffee-related derivative instruments have not been designated as cash flow hedges or do not qualify for hedge accounting despite hedging the Company's future cash flows on an economic basis.

At December 31, 2013, approximately 90% of the Company's outstanding coffee-related derivative instruments, representing 46.9 million pounds of forecasted green coffee purchases, were designated as cash flow hedges. At December 31, 2012 no coffee-related derivative instruments were designated as accounting hedges.

For the three and six months ended December 31, 2013, the Company recorded coffee-related net derivative losses in other comprehensive income ("OCI") in the amounts of $2.3 million and $5.4 million, respectively. No coffee-related net derivative gains or losses were recorded in OCI for the three and six months ended December 31, 2012.

Interest Rate Swap

Effective December 1, 2012, the Company entered into an interest rate swap transaction utilizing a notional amount of $10.0 million and a maturity date of March 1, 2015. The Company entered into the swap transaction to effectively fix the future interest rate during the applicable period on a portion of its borrowings under the revolving credit facility. The swap transaction is intended to manage the Company's interest rate risk related to its revolving credit facility and requires the Company to pay a fixed rate of 0.48% per annum in exchange for a variable interest rate based on 1-month USD LIBOR-BBA. The interest rate swap is not designated as an accounting hedge.

Effect of Derivative Instruments on the Financial Statements

Balance Sheet

Fair values of derivative instruments on the consolidated balance sheets (in thousands):

	Derivatives Designated as Cash Flow Hedges				Derivatives Not Designated as Accounting Hedges
	December 31,		June 30,		December 31,			June 30,
	2013		2013		2013			2013
Financial Statement Location:
Short-term investments:
Coffee-related derivatives	$	—	$	—	$	—		$	4
Short-term derivative liability:
Coffee futures	$	7,146	$	9,331	$	(21	)	$	565
Other current liabilities:
Interest rate swap	$	—	$	—	$	29		$	25
Long-term derivative liability:
Coffee futures	$	210	$	1,129	$	—		$	—

Statement of Operations

For the three and six months ended December 31, 2013, the Company recognized $0.1 million and $0.7 million, respectively, in net losses on coffee-related derivative instruments designated as cash flow hedges for ineffectiveness and 10% of the total coffee-related derivative instruments were excluded from the effectiveness assessment since they were not designated as cash flow hedges. Cash flow hedge contracts outstanding as of December 31, 2013 will expire within 23 months.

The following table presents pretax net gains and losses on coffee-related derivative instruments designated as cash flow hedges, as recognized in "Cost of goods sold," "AOCI" and "Other, net" (in thousands):

	Three Months Ended  December 31,					Six Months Ended  December 31,					Financial Statement Classification
	2013			2012		2013			2012
Net losses recognized in earnings (effective portion)	$	(3,735	)	$	—	$	(5,954	)	$	—	Cost of goods sold
Net losses recognized in other comprehensive income (loss) (effective portion)	$	(2,260	)	$	—	$	(5,385	)	$	—	AOCI
Net losses recognized in earnings (ineffective portion)	$	(143	)	$	—	$	(650	)	$	—	Other, net

For the three and six months ended December 31, 2013, there were no gains or losses recognized in earnings as a result of excluding amounts from the assessment of hedge effectiveness or as a result of reclassifications to earnings following the discontinuance of any cash flow hedges.

Gains and losses on derivatives not designated as accounting hedges are included in "Other, net" in the Company's consolidated statements of operations and in "Net losses (gains) on derivatives and investments" in the Company's consolidated statements of cash flow.

Net gains and losses recorded in "Other, net" are as follows:

(In thousands)	Three Months Ended December 31,						Six Months Ended December 31,
	2013			2012			2013			2012
Net losses on coffee-related derivatives	$	(347	)	$	(7,859	)	$	(1,195	)	$	(7,156	)
Net (losses) gains on investments	(55		)	59			(750		)	158
Net gains (losses) on interest rate swap	2			(40		)	(4		)	(40		)
Net losses on derivatives and investments	(400		)	(7,840		)	(1,949		)	(7,038		)
Net (losses) gains on sales of assets	(73		)	(11		)	50			3,202
Other (losses) gains, net	(114		)	195			529			1,125
Other, net	$	(587	)	$	(7,656	)	$	(1,370	)	$	(2,711	)

Offsetting of Derivative Assets and Liabilities

The Company has agreements in place that allow for the financial right of offset for derivative assets and liabilities at settlement or in the event of default under the agreements. Additionally, the Company maintains accounts with its brokers to facilitate financial derivative transactions in support of its risk management activities. Based on the value of the Company’s positions in these accounts and the associated margin requirements, the Company may be required to deposit cash into these broker accounts.

The following tables present the Company’s net exposure from its offsetting derivative asset and liability positions, as well as cash margins on deposit with each of its counterparties as of the reporting dates indicated:

Counterparty A		Gross Amount Reported on Balance Sheet		Netting Adjustments			Cash Collateral Posted (Received)		Net Exposure
At December 31, 2013	Derivative Assets	$	229	$	(229	)	$	—	$	—
	Derivative Liabilities	$	7,564	$	(229	)	$	3,576	$	3,759
At June 30, 2013	Derivative Assets	$	4	$	(4	)	$	—	$	—
	Derivative Liabilities	$	11,025	$	(4	)	$	8,084	$	2,937

Counterparty B		Gross Amount Reported on Balance Sheet		Netting Adjustments		Cash Collateral Posted (Received)		Net Exposure
At December 31, 2013	Derivative Assets	$	—	$	—	$	—	$	—
	Derivative Liabilities	$	29	$	—	$	—	$	29
At June 30, 2013	Derivative Assets	$	—	$	—	$	—	$	—
	Derivative Liabilities	$	25	$	—	$	—	$	25

Credit-Risk-Related Features

The Company does not have any credit-risk-related contingent features that would require it, in certain circumstances, to post additional collateral in support of its net derivative liability positions. The Company had $3.6 million and $8.1 million, respectively, in restricted cash representing cash held on deposit in margin accounts for coffee-related derivative instruments at December 31, 2013 and June 30, 2013 (see Note 5). Changes in commodity prices and the number of coffee-related derivative instruments held could have a significant impact on cash deposit requirements under the Company's broker and counterparty agreements.

Cash Flow Hedges

Changes in the fair value of the Company's coffee-related derivative instruments designated as cash flow hedges, to the extent effective, are deferred in AOCI and reclassified into earnings in the same period or periods in which the hedged forecasted purchases affect earnings, or when it is probable that the hedged forecasted transaction will not occur by the end of the originally specified time period. Based on recorded values at December 31, 2013, $7.1 million of net losses are expected to be reclassified into earnings within the next twelve months. These recorded values are based on market prices of the commodities as of December 31, 2013. Due to the volatile nature of commodity prices, actual gains or losses realized within the next twelve months will likely differ from these values. These gains or losses are expected to substantially offset net losses or gains that will be realized in earnings from previous unfavorable or favorable market movements associated with underlying hedged transactions.